How to Calculate VAT: Add, Remove and the VAT Fraction
Calculate VAT by adding it to a net price or removing it from a gross price. Worked examples at 20%, 5%, 15% and 19%, plus the VAT fraction shortcut.
By Awais, Founder and editor-in-chiefPublished
To add VAT, multiply the net price by 1 plus the VAT rate. To remove VAT from a price that already includes it, divide by 1 plus the rate. At the UK’s 20% standard rate, £100 + VAT is £100 × 1.2 = £120, and a £120 price including VAT contains £120 ÷ 1.2 = £100 net and £20 of VAT.
The one thing not to do is take 20% off the gross price. 20% of £120 is £24, which overstates the VAT. The VAT calculator does both directions at any country’s rate.
The two formulas
Removing VAT: net = gross ÷ (1 + rate); VAT = gross − net
Write the rate as a decimal: 20% = 0.20, 5% = 0.05, 15% = 0.15.
Worked examples by country
| Country | Standard rate | Add VAT to 1,000 | Remove VAT from 1,000 |
|---|---|---|---|
| United Kingdom | 20% | 1,000 × 1.20 = 1,200 (VAT 200) | 1,000 ÷ 1.20 = 833.33 (VAT 166.67) |
| United Arab Emirates | 5% | 1,000 × 1.05 = 1,050 (VAT 50) | 1,000 ÷ 1.05 = 952.38 (VAT 47.62) |
| Saudi Arabia | 15% | 1,000 × 1.15 = 1,150 (VAT 150) | 1,000 ÷ 1.15 = 869.57 (VAT 130.43) |
| Germany | 19% | 1,000 × 1.19 = 1,190 (VAT 190) | 1,000 ÷ 1.19 = 840.34 (VAT 159.66) |
| Pakistan (sales tax on goods) | 18% | 1,000 × 1.18 = 1,180 (tax 180) | 1,000 ÷ 1.18 = 847.46 (tax 152.54) |
Each country also has reduced and zero rates for certain goods and services. The UK, for example, charges 5% on domestic energy and 0% on most food and children’s clothes. Check the rate for your specific item before you rely on the standard one.
The VAT fraction: a shortcut for removing VAT
The share of a VAT-inclusive price that is VAT is:
| Rate | VAT fraction | VAT in a 1,000 gross price |
|---|---|---|
| 5% | 5/105 = 1/21 | 47.62 |
| 15% | 15/115 = 3/23 | 130.43 |
| 18% | 18/118 = 9/59 | 152.54 |
| 19% | 19/119 | 159.66 |
| 20% | 20/120 = 1/6 | 166.67 |
| 23% | 23/123 | 186.99 |
For the UK’s 20% rate, VAT is one sixth of any VAT-inclusive price. A £54 restaurant bill includes £54 ÷ 6 = £9 of VAT. HMRC calls this the “VAT fraction” and uses it in its own guidance.
Why subtracting the rate is wrong
VAT is calculated on the net price, not the gross one. When you take 20% off a gross price, you’re taking 20% of a number that already includes the VAT.
Example: a laptop costs £600 including VAT.
- Wrong: £600 × 0.20 = £120 VAT, net £480. Check: £480 + 20% = £576, not £600.
- Right: £600 ÷ 1.2 = £500 net, VAT £100. Check: £500 + 20% = £600 ✓.
The wrong method overstates VAT by 20% at the UK rate. For a business reclaiming input VAT, that’s a real error in the VAT return.
Rounding
You can calculate VAT on each line or on the invoice total, but pick one method and use it consistently. In the UK, HMRC lets you round the total VAT on an invoice down to the nearest penny, and sets separate rules for line-by-line rounding (VAT Notice 700, section 16). Other tax authorities have their own rules. When removing VAT, work out the net first, round it, and then take VAT as the difference, so the net and VAT always add up to the gross. The VAT calculator works this way.
VAT on invoices
If you’re VAT-registered, your invoices must show the net amount, the VAT rate, the VAT amount and the total, plus your VAT number. The invoice generator adds VAT lines to any invoice, and our guide to making a freelancer invoice lists what each invoice should include.
In the UK, you must register for VAT once your VAT-taxable turnover passes £90,000 in a rolling 12 months. UAE businesses must register above AED 375,000 of taxable supplies a year, and Saudi businesses above SAR 375,000.
VAT, GST and sales tax
- VAT (UK, EU, UAE, Saudi Arabia and others) is charged at each stage of production and sale; businesses reclaim the VAT they pay on inputs.
- GST works the same way in many countries. India splits it into CGST and SGST (within a state) or IGST (between states). The GST calculator handles India’s 5%, 18% and 40% slabs.
- US sales tax is added only at the final sale to the consumer, at rates set by states, counties and cities. Prices are usually shown before tax. The sales tax calculator adds or removes it.
The add and remove formulas are the same for all three.
FAQ
How do I calculate 20% VAT?
To add it, multiply the net price by 1.2. To remove it from a price that includes VAT, divide by 1.2. The VAT is the difference between the two.
How do I work out VAT from a total that includes VAT?
Divide the total by 1 plus the rate to get the net price, then subtract. At 20%, the VAT is one sixth of the total; at 5%, one twenty-first; at 15%, three twenty-thirds.
What is the VAT rate in the UAE and Saudi Arabia?
5% in the UAE and 15% in Saudi Arabia, the standard rates. Some supplies are zero-rated or exempt.
Is VAT charged on the price after a discount?
Yes. VAT is calculated on the amount the customer actually pays, so apply the discount first, then add VAT to the discounted net price.
Sources
- GOV.UK: VAT rates
- GOV.UK: VAT registration thresholds
- HMRC: VAT guide (VAT Notice 700)
- UAE Federal Tax Authority: VAT
- ZATCA (Saudi Arabia): Value added tax
- European Commission: VAT rates
- Federal Board of Revenue, Pakistan
Rates checked on 28 October 2026 for standard-rated goods and services. Reduced, zero and exempt rates vary by item.